Nuclear friction within the Czech government

By bne IntelliNewsMay 29, 2013

Nicholas Watson in Prague -

The Czech prime minister assured his Russian counterpart on May 27 that the process for choosing the winner of the country's nuclear tender would be fair and transparent. Yet a growing split in the cabinet, a continuing standoff with France's Areva after it was ejected from the tender, and now sources saying CEZ is asking the remaining bidders to finance the €8bn-12bn nuclear expansion has cast further doubt on the whole project.

During a trip to Moscow, Czech PM Petr Necas told his Russian counterpart Dmitry Medvedev that, "The tender will be transparent and the best bid will win," according to CTK.

That Necas felt it necessary to reiterate this says much about how tarnished the process has become.

Following Areva's controversial disqualification from the tender back in October over what the state-controlled utility CEZ called "serious shortcomings" in its preliminary bid, the Russian-Czech consortium of Skoda JS, Atomstroyexport and Gidropress is duking it out with the Japanese-US firm Westinghouse for the right to build two new reactors at the Temelin nuclear power plant. CEZ plans to sign the contract by the end of 2013.

Yet doubts about the estimated CZK200bn-300bn outlay that CEZ will have to shoulder to double the plant's 2,000-megawatt capacity have reached beyond shareholders and the press, and into the heart of government.

In an interview with Hospodarske Noviny published on May 24, the powerful finance minister, Miroslav Kalousek, who is the architect of the coalition government's austerity programme, wondered whether the nuclear expansion is an "efficient" investment given that electricity prices remain stubbornly lower than they were when the project was first drawn up. He also reiterated how "unpleasantly surprised" the government was with the price that the two contenders put in their bids.

Kalousek's remarks echoed those of his colleague in the junior coalition party TOP09, Foreign Minister Karel Schwarzenberg, who told the Pravo newspaper in April that it's not clear enlarging Temelin makes much sense.

Necas, head of the largest coalition party, the Civic Democrats (ODS), remains wholeheartedly committed to the project, and likened himself to a statesman making tough long-term decisions while ridiculing Kalousek as a beancounter. "There is a difference between an accountant, a politician whose intellectual horizon reaches an annual book closing or or the end of the election term at most, and a statesman who is thinking about what will be happening in the country in aboutthe year 2030."

Yet nagging questions about the cost won't go away. Industry sources in Prague say CEZ is now asking the two consortiums to finance the project after the utility failed to get the government to offer financial guarantees, which critics say are essential to make the project even remotely economically viable. This is all a far cry from the days when CEZ officials were boasting the utility could fund the project using its own cash. Rosatom, the Russian nuclear holding, has stated in the past it would be prepared to offer full financing for the project; Westinghouse has ruled this out.

Then there is the open question of Areva, which is still smarting from its expulsion and is in the process of appealing the decision, possibly as far as the EU - a process that could take years. The French company has already lost several appeals, and is currently awaiting a decision on its latest from the chairman of the Czech competition watchdog.

Areva was excluded because, in CEZ's words, it "had not fulfilled some other crucial criteria defined in the tender." Yet scepticism over the true reasons behind the French firm's disqualification grew in April when a leaked document appeared to show serious deficiencies in the two other contenders' bids.

Following a self-congratulatory statement from Westinghouse at the end of March that a preliminary ranking from CEZ showed it was ahead in the race, an internal tender document appeared in the local press showing Westinghouse had amassed a total of around 80 points out of a maximum 100 for the four criteria, while the Russian-led consortium had around 66.5 points. But under the criterion "Terms & Conditions", which covers guarantees during construction and the payment calendar, the Russian bid garnered only three points out of a maximum of 20, while Westinghouse had only one point.

"It's astonishing that both bids got such very low grades on this," says one industry source. "How can a contract be awarded when the evaluation on this is so bad - with such a low grade for Westinghouse, it should have been expelled."

In April, CEZ embarked upon the next stage of the process, in which CEO Daniel Benes said the utility would ask both bidders to raise "significantly" their offers in terms of the price and technical aspects.

For a growing number of critics, neither contender will be able to do enough to convince them that the project is viable.

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